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Chart: Should Investors Expect S&P 500 Correction Next Month?

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Along with a downside correction in the stock market, gold and silver appear to be on track for strong moves up in February.

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According to Elliott Wave Analysis, the S&P 500 (INDEXSP:.INX) US stock market index has been in Elliott Wave Major 3 of Primary wave 3 from 1267 by my firm's best projected counts. Back in early September 2013, our technical analysis of US stock trends predicted a large rally up in the S&P 500 to 1822-1829, which we managed to see hit just three months later from the mid-1600s.

Recently, the market had a bit of an extension higher than our original 1822-29 pivot projections, but we see possible trouble ahead. My company's Elliott Wave Theory interpretation is based on Fibonacci sequencing, Investment Advisor sentiment surveys, traditional technical analysis patterns, and more.

The stock market is climbing here, now likely in a final 5th wave of Major 3, and we believe it may truncate, or be shorter, than normally expected. We also have a rising bearish wedge from the Intermediate wave 4 lows of 1560 for Major wave 3 structure, which is a classic topping pattern for the markets in general.

Our view is that the S&P 500 Index, or the market, should top out around 1868, and then begin a Major Elliott Wave 4 correction in February, and, at the same time, gold and silver are forming bottoms now and will begin strong moves up in February.

Much like my Kitco.com piece in early September 2013 called for a top in gold and a bottom in the S&P 500 at the time, I see the opposite nearing now.

Below is my company's updated best projection on the S&P 500 market trend analysis and near-term action, with potential, of course, for a blow-off reversal top over the 1868 area. For now, we would watch 1868, and we would be buyers of gold as we have been saying for several weeks during this final window into early February.



Twitter: @activetrading

Editor's Note: David Banister is the chief investment strategist and co-founder of ActiveTradingPartners.com, a small-cap portfolio and market advisory service.

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No positions in stocks mentioned.

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